‘True’ Homeownership in Rural America

Homeownership rates have traditionally been higher in rural and small town areas than in the nation as a whole. But, homeownership doesn’t mean the same thing for every homeowner. Rural owners are more likely to have mortgage-free homes than their suburban or urban counterparts.

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The United States is largely a nation of homeowners.

Owning a home has traditionally been a foundation of the “American Dream,” conveying prosperity, financial security, and upward mobility — or so it was thought until 2008. Today, the housing crisis and flagging economy have taken some of the luster from homeownership, and has called into question elements of our nation’s housing systems and policies.

Homeownership was not always the norm in the United States. In 1910, less than half of all U.S. homes were owned by their occupants. Yet over the past century, Americans have increasingly purchased their own homes — aided largely by rising incomes and a burgeoning mortgage finance system.

In 2010, 65.1 percent of U.S. homes were owner occupied. This rate is actually lower than the 2000 homeownership level of 66.2 percent, but homeowner rates have consistently been above 60 percent since the 1960s.

In rural and small town communities , homeownership rates are even higher than the national level. In 2010, approximately 17.9 million, or 71.6 percent of occupied homes in rural communities were owned by their inhabitants. Consistent with national trends, the 2010 rural homeownership rate declined by two percentage points from the year 2000 level.

(The definition of “rural and small towns” used in this brief was developed by the Housing Assistance Council (HAC), and is largely a measure of housing density and commuting at the Census tract level. It is important to note that HAC’s rural and small town and definition is different than other measures. To see the particulars of our definition, go here.)

Homeownership Across the Rural Spectrum

Homeownership varies across demographic groups, and regions within rural and small town America.

Regionally, rural and small town homeownership rates are highest in the Midwest at 74 percent, and lowest in the West, where 68 percent of rural households own their homes. Among states, Delaware has the highest rural and small-town homeownership rate, at 77.8 percent, followed closely by Minnesota and Michigan, at 77 percent homeownership.

Overall, 37 states have rural and small town homeownership rates above 70 percent. Only two states —California and Hawaii — have rural and small town homeownership rates below the national level of 65.1 percent.

Ownership of housing also varies across racial and ethnic groups in rural and small-town communities. Similar to national characteristics, rural and small town minorities have substantially lower homeownership rates than white non-Hispanic households.

Nearly three-quarters of rural white non-Hispanic headed households own their homes, while just 56 percent of rural minority-headed households are homeowners. The homeownership rate for rural and small town African Americans and Hispanics (55 percent) is 20 percentage points lower than that of white non-Hispanics households in rural communities.

At the same time, the level of rural minority homeownership is 8 percentage points higher than that of minorities in the United States as a whole.

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Some of the largest differences in rural and small town homeownership rates are seen across age groups.

Typically, homeownership rates increase with age. For example, only 44 percent of rural and small-town householders below age 34 own their homes, compared to an 82 percent homeownership rate for householders age 65 and over. While seniors have among the highest homeownership levels of any rural and small town demographic groups, these, too, vary by age.

The homeownership rate for householders age 65 to 74 is 84 percent, while the homeownership rate for seniors age 85 and over is lower at 70.8 percent.

The much discussed “baby boom” generation (age 45 to 64 in 2010) also has high homeownership rates in rural and small-town areas. Nearly eight in ten rural and small town baby-boomers own their homes which is six percentage points higher than their suburban and urban boomer counterparts.

“True” Homeownership

Homeownership doesn’t mean the same thing for every homeowner. Housing tenure in the United States is often viewed through an “either-or” lens, in which a household either owns or rents their home. In actuality, there are three basic forms of housing tenure : 1) renting; 2) owning with a mortgage; and 3) owning without a mortgage — often referred to as “free and clear” homeownership, in which a homeowner has no mortgage debt. A slightly closer look at data from the 2010 Census provides some nuance into mortgage-free, or what could be called “true,” homeownership, especially in rural communities.

Homeowners in rural and small town communities have higher levels of mortgage-free homeownership than their suburban and urban counterparts.

Nearly 42 percent of homeowners in rural and small town America own their homes free and clear of mortgage debt, compared to roughly 27 percent of suburban and urban homeowners with no mortgage. The higher rate of mortgage-free homeowners in rural and small town areas is likely attributable to several factors.

First, there are a large number of manufactured homes in rural areas. Manufactured homes, typically financed through personal property loans, have shorter loan terms than standard mortgage financing. These finance elements combined with relatively low purchase prices result in a substantial number of debt-free manufactured homes.

Demographic and age factors also impact the mortgage status of rural homeowners. The population is older in rural and small town communities than in the nation as a whole, including more senior households. Typically, homeownership rates increase and mortgage debt declines with age. Over three-quarters of rural homeowners age 65 and over own their homes free and clear.

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While more rural households own their homes free and clear, it is also important to note the equity they accumulate is likely to be less than that for homes in urban or suburban areas because rural houses are generally less expensive.

Factors such as distance from employment opportunities and amenities contribute to the lower value and appreciation of homes in many rural and small town markets. In rural and small town communities, over 40 percent of homes are valued at less than $100,000, compared to 23 percent of homes nationally. Additionally, many households residing in manufactured homes may own their homes, but not the lot on which their unit is placed. Residents who rent the land under their home may have reduced potential for appreciation in its value.

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Home values and assets may be lower in rural areas, but the level of mortgage-free homeowners is not an insignificant statistic. Following a decade of lax financing standards and unconstrained housing consumption, millions of homeowners across the nation are “underwater” with substantial, and in some cases, unsustainable levels of housing debt.

While the housing crisis has not spared rural America, many rural and small town homeowners are buoyed by relatively large levels of equity in their homes. For most Americans, a home is still the largest asset they will ever own. Despite stagnant and declining home values nationally, asset and investment accumulation through homeownership is still a considerable economic factor for many rural residents.